List of 13 Tips to save Income Tax in India in 2021
It’s not unusual for people to look for tax-saving investments as the average tax outgo for every Indian is relatively high. The last thing anybody wants to do is pass up opportunities to save money on their tax bill. However, there are a wide variety of approaches to this problem that suit various personalities. As a consequence, individuals lose out on more effective ways of saving tax by sticking to the tactics they’ve already learned. The purpose of this essay is to inform persons who pay income tax how they might save money.
A percentage of your income is given to the government in the form of income taxation. Annually, this tax is levied. The government uses this money to carry out administrative duties. So if you have questions like, what are the best ways to income tax saving, what are the tax saving options for salaried, how to save income tax in India, which instrument save tax, which are the best tax saving schemes in India? We will discuss all this today.
How to save tax in India?
There are two tax-saving options you can apply. First, you may reduce your taxable income by claiming the costs you’ve incurred, and the other is by investing your earned money in tax-saving investments. To promote term savings among the public, the government encourages consumers to save tax by allotting their money in tax-saving instruments specified under Income Tax Act. It’s a simple approach to guarantee that you have some kind of investment and do not have to worry about spending too much money on tax returns.
While salaried workers have one to submit a specific set of forms for income tax filing, self-employed people need to submit a different set of forms. The following is a list of strategies that are available as tax-saving options for salaried 2020-21. Other than claiming an exemption under Section 80C, the following tips may help you save money on your taxes in India. We strongly recommend you to refer to verify these below pointers since there are high chances for minor amendments to be made by the IT department every year.
List of 13 Popular Investment Options to Save Income Tax in India
The following is a list of the 13 best investment plans to save income tax in India for salaried person in 2020-21 as mentioned below:-
- Home Loan: Section 80C allows you to save money on taxes if you have taken a home loan. Section 80C provides tax benefits on the principal amount to Rs. 1.5 lakhs, whereas Section 24 limits the interest amount to Rs. 2 lakhs.
- Interest in savings account: In general, the interest generated on a savings account is free from tax deductions up to Rs.10000. This sum represents the sum of all of your bank accounts’ savings. In the case of senior citizens, this limit rises to Rs. 50,000.
- NRE Accounts: Non-resident Indians may earn interest on their NRE accounts in India. In addition to the interest earned on the accumulating sum, they get interested in the fixed deposit. This sum is exempt from taxation because of the Indian government’s liberal treatment of NRIs.
- Insurance policy proceeds: A life insurance policy’s proceeds may be withdrawn either at the policy’s maturity date or at the time of a claim. It is tax-free if the premium paid is less than 20% of the covered amount. This rule applies to any policies that were issued before April 1 of 2012. The proportion reduces to 15 for plans issued after April 1, 2012.
- Save on capital gains: There is a 10% tax levied on long-term capital gains that are generated above Rs. 1 lakh if received from shares or equity mutual funds sold. You can save on this capital gains tax by selling your mutual fund units or stocks after a year.
- Exemption for gifts: Everyone in the family, particularly the newlyweds, looks forward to a wedding because of the joy it brings. It’s a huge deal in India, and the bride and groom get a tonne of presents. Such donations are exempt from taxation under Section 56(2). Therefore, gifts given to newlywed couples are not taxed, regardless of the form. Gifts like this might come from close family or friends.
- Inherited money: The amount received through a will is not taxed in India. So if you are the legal heir and have received a considerable share of payment through will, it does not qualify for taxation.
- Section 80C: The government of India grants a facility to invest up to Rs. 1,50,000 as per Section 80C of the Income Tax Act to promote saving. Investing in tax-saving choices under 80C allows you to save money on taxes while also making long-term investments in your financial security.
- National Pension Scheme (NPS): Payments made to the National Pension Scheme qualify for tax exemption under Section 80C, with a maximum contribution limit of Rs. 150,000. Tax-free investments in the National Pension Scheme, on the other hand, allow you to put more money into your retirement fund.
- PF Interest: No tax is levied on the interest earned on the provident fund. So choose to deposit regularly in your provident fund account, which helps you save and generates tax-free interest.
- Repayment of education loan: Section 80E of the Income Tax Act provides for loans for educational purposes. The interest paid on a student loan is not deductible from income. Such a category does not have a defined limit.
- Health Insurance Premium: Section 80D of the tax code is devoted only to the deduction of health insurance premiums. Health insurance premiums are not tax-deductible for a part of the cost. This sum fluctuates every year, and you are eligible to save more taxes if you pay the health insurance premium for the senior citizen parents.
- Disability deduction: Section 80DD includes deductions for expenses related to the treatment of a disabled dependent. There are fixed deductions of Rs. 75,000 and Rs. 125,000 for those with 40% to 80% disability and more than 80% disability, respectively. Treatment of a sickness, rehabilitation, or training should necessitate these costs. To take advantage of this deduction, you’ll need to submit a letter from your doctor stating that you’re disabled.
Though short, these tips are sure to help you get the correct answer on how to save tax in India. And probably this is the right time to start planning on how to make tax-free investments if you have not still done it.